Stay-at-Home Parents: Six Money Secrets for Families Shifting to One Income

Tips for moms or dads who are thinking of opting out of the workplace

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When I was growing up, stay-at-home moms were the norm, and many American household budgets were based on one income. A lot has changed since then, but there are still many parents who choose to leave their job and stay at home with the kids. And, of course, in many families it’s less of a choice than a necessity when someone gets laid off or child-care costs become too steep.

While the number of stay-at-home moms has been holding relatively steady in recent years, at approximately 5 million, the number of stay-at-home dads who managed the household last year while their wives worked was estimated to be 176,000. This may seem a small number in comparison, but it’s more than doubled over the last decade.

My stepkids are all grown up now, but I hear friends and colleagues who are expecting a baby or who have young children agonizing over tough questions like whether they can afford to have one parent stay at home, which parent it should it be and what impact it’ll have on their lifestyle, retirement and relationship. Deciding as a couple to stop earning two paychecks can be difficult emotionally and financially — even if a working mother or father wants to stay at home with the kids.

(MORE: Kids and Money: Is It O.K. to Play Financial Favorites?)

Here are some things to consider if you’re thinking about becoming a single-income family:

  1. Be realistic about your budget. The math may be more favorable with one parent staying at home rather than paying for day care, but you still may need to reconsider your lifestyle expenses. Inventory all of your fixed expenses, including things like your mortgage and utilities, and discretionary expenses, like entertainment and clothing. Be prepared to make tradeoffs on one or both fronts in order to make the arrangement work.
  2. Be smart about credit cards. While the CARD Act of 2009 put in place many positive provisions to protect consumers, it also requires credit card issuers to consider individual income versus household income. This could make it harder for a non-working spouse to get a credit card and maintain credit history. In addition to your credit cards, review your auto loans, mortgages or other debt to ensure that the paperwork is in both parents’ names.
  3. Think about insurance. When only one parent is bringing home a paycheck, it can be easy to overlook insurance coverage needs for a stay-at-home parent. But there are circumstances when a stay-at-home parent should be insured. Young couples may dismiss disability insurance, but it’s crucial to understand that many disabilities can come from sports injuries or car accidents. If a stay-at-home parent were to become ill or disabled and couldn’t care for children or move about their home, the couple would likely need to hire help. And while no one wants to consider the premature death of a spouse, it is prudent to have adequate life insurance in place, especially if you have children.
  4. Think about retirement. If you’re living on one income, it’s critical to plan and use every penny of each paycheck wisely — now and in the future. Upon leaving the workforce, a stay-at-home parent may want to consider rolling his or her employer-sponsored retirement plan, such as a 401(k) or 403(b), into an IRA or a Roth IRA. The working parent can continue to fund a spousal IRA or Roth IRA to save for the retirement of both parents. Also, if you have kids, set up a college fund as early as possible; small monthly contributions to a 529 account or College Savings Plan will add up over time.
  5. Be clear about who’s doing what. While every couple should define roles and responsibilities in their marriage, things can get a bit more complicated when a parent decides to stay home. Figure out who will handle financial paperwork, and if you’d like to do these tasks together, set aside time at least monthly to pay bills, update information and review accounts. Be clear about who will do what and anticipate how household decisions may be made differently now that one person is at home.
  6. Keep the lines of communication open. Paying bills is one thing, but the emotions associated with child-rearing in the home or continuing to earn a paycheck is another. These emotions can be complex and, regardless of gender, if one parent is leaving the workforce, the dynamics of your relationship can change. Assumptions about how you spend time, assert parental authority and maintain independence can all come into question. Though they may not always be easy, have conversations before one parent quits his or her job — and, afterward, along the way — to ensure that the situation is still working for all family members.

(MORE: Women Can’t Have It All, but They Can at Least Simplify Their Finances)

Becoming a stay-at-home parent can be a life-changing — and very rewarding — experience for the entire family. Whether the shift is temporary or if you or your spouse decides to stay at home for the long haul, plan for how your lifestyle, your budget and your relationship may change.

De Baca is vice president of wealth strategies at Ameriprise Financial.